Was 2015 the “good old days”? 2016 might well make it feel that way. Many causes for that, and strategic shifts are needed immediately to meet this wave front of change.

First question, how do we right size and retool our company so we live to fight another day? Here is a straightforward solution: E+T=+(E+P). Translated, Experience plus Technology equals a positive outcome for E&P companies.

E is experience of the people, taking one giant step back and reassessing its vision and CAPEX priorities based on the experience of its people, and

T is technology, selectively employing new and proven drilling, completion and production technologies in more conventional reservoirs.

This requires immediate and proactive moves by management. A distressed enterprise is not transformed by waiting for possible oil/gas price increases. That is not what capital providers have made a bet on. When they bet the horse, they bet the jockey. It’s back-to-basics time, but this time, with the twist of embracing recently proven technologies. Here are some guideposts:

First and foremost, the “E”. Experience.

My colleague, William Weekley, and I always put this first. The industry’s “crew change” of the past few years has vacated much needed field level experience, now, more than ever. To help obviate:

Find the field foreman that has overseen the development and maintenance of the field for 10-30 years. Yes, they may have shortcomings in terms of supporting new technologies. Yes, they may have shortcomings in moving outside their “circle of trust” in using more competitive priced vendors of services. That repositioning of thinking is the job of management. Listen and learn and then set the guidelines.

Over the past 5-10 years, many properties have changed hands, making this focus imperative. There are countless cases of companies that buy a property and then find production drops like a rock. Why? One answer, at acquisition, management may believe they have the best field people in the business, so just review the well files and put new management’s own people in the field. Doing so can lose the color and narrative prior field level employees can offer. That can be a company’s greatest asset, if tapped into properly and with respect for the people.

Management experience in oversight is critical. New to the farm engineers may wish to run amuck over the older vets. Younger egos that forgot to check those at the door, may not allow an admission of deficient field specific knowledge. CEO— it’s your responsibility to set guidelines to manage that risk.

Second, the “T”. Technology.

Technology has revolutionized extraction techniques, in unconventional reservoirs. It is now doing so with conventional reservoirs as well. The evaporation of ground floor shale economics, is moving the application of many technologies down to less flamboyant conventional reservoirs. By example, advances in downhole tools for reducing turning radius on lateral excursion legs has reduced to only 75’ or less.

Optimizing production from excursion legs with properly designed fracs has been a focus for well over a decade. That knowledge base is now being deployed on more conventional reservoirs in a highly economic fashion, even in today’s pricing environment. A good example– in the Southeast Permian a 3,000‘ vertical and a 2,500’ lateral was recently completed with 7 fracs stages for under $750,000, all in. That can work at $25 per barrel or less.

Overlaying all the above needs to be a realistic economic analysis. I prefer flat price decks at $20/30/40 for WTI, with gravity and basis differential incorporated. Using a flat price deck facilitates decision-making on the economic merits of specific CAPEX being allocated to a project. CAPEX is controllable, prices are not.

Management is charged with being certain that field level employees fully appreciate the critical importance of not only the best technology applicable, but also the most cost efficient vendors. The “Buddy-Buddy system is a relic of the past. However, that must be balanced against finding the best of crews to implement.

Everyone has a job to do. As encouraged before, best to do that now rather than waiting for the knock on the door from your capital provider’s credit officer. They will not come bearing belated Christmas presents.